Sell Life Insurance Policy Calculator

Life Insurance Policy Settlement Estimator

(This is an estimate; actual life expectancy is determined by medical underwriting.)

Understanding Life Settlements: Selling Your Life Insurance Policy

A life insurance policy is often seen as a long-term asset, providing financial security for your loved ones after you're gone. However, circumstances change, and sometimes a policy that once made sense no longer fits your needs. This is where a "life settlement" comes into play – the sale of an existing life insurance policy to a third party for a cash sum.

What is a Life Settlement?

A life settlement is a financial transaction where a policyholder sells their life insurance policy to a third-party investor. In return, the policyholder receives a lump sum cash payment that is greater than the policy's cash surrender value but less than its net death benefit. The buyer then becomes the new owner of the policy, pays all future premiums, and receives the death benefit when the insured passes away.

Why Consider Selling Your Policy?

There are several common reasons why individuals, typically seniors, might consider a life settlement:

• No Longer Needed: Your dependents are grown, your debts are paid, and the original purpose of the policy no longer exists.
• Unaffordable Premiums: Premiums have become too expensive, and you're struggling to keep the policy in force, risking a lapse.
• Need for Cash: You require funds for medical expenses, long-term care, retirement income, or other financial needs.
• Better Investment Opportunities: You believe the cash from the settlement could be better utilized in other investments.
• Tax Efficiency: In some cases, a life settlement can be more tax-efficient than surrendering the policy.

Who is Eligible for a Life Settlement?

While eligibility varies, general criteria often include:

• Age: Typically, policyholders are 65 years or older. The older you are, the more attractive your policy might be to investors.
• Health Status: A reduced life expectancy due to health conditions often increases the policy's value in a settlement.
• Policy Type: Universal Life, Whole Life, and convertible Term Life policies are generally eligible. Term policies that are not convertible usually do not qualify.
• Policy Face Value: Policies with a death benefit of $100,000 or more are usually preferred, though smaller policies can sometimes qualify.

Factors Affecting Settlement Value

The cash offer you receive for your policy is influenced by several key factors:

• Policy Face Value (Death Benefit): A higher death benefit generally leads to a higher potential settlement.
• Policyholder's Age and Health: The shorter the estimated remaining life expectancy of the insured, the more valuable the policy is to an investor. This is a primary driver of value.
• Annual Premium Cost: Lower future premium payments make the policy more attractive to buyers, as their ongoing costs are reduced.
• Current Cash Surrender Value: The settlement offer will always be greater than the cash surrender value offered by the insurance company.
• Policy Type and Features: Certain policy types and riders can impact value.
• Market Conditions: The demand from institutional investors for life settlements can fluctuate.

The Life Settlement Process

The process typically involves:

1. Consultation: Discuss your options with a life settlement broker or financial advisor.
2. Application: Submit an application with policy details and medical records.
3. Underwriting: Investors review your medical history to determine your estimated life expectancy.
4. Offers: Multiple investors may bid on your policy, leading to competitive offers.
5. Acceptance & Closing: If you accept an offer, the policy ownership is transferred, and you receive the cash payment.

Important Considerations

• Tax Implications: Life settlement proceeds may be subject to federal and state income taxes. Consult a tax advisor.
• Loss of Coverage: Once sold, the policy no longer provides a death benefit to your beneficiaries.
• Alternatives: Before selling, consider other options like surrendering the policy, taking a policy loan, or reducing the death benefit to lower premiums.

Our calculator provides an initial estimate to help you understand the potential value of your policy in a life settlement. For precise figures and professional guidance, always consult with licensed life settlement professionals.